Burning Up the Market for Smoking

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The product selected for this marketing study is cigarettes.  The market for cigarette consumption in the US has declined significantly over the last few decades.  The reasons for this will be explored below. Yet it is crucial to mention there are serious health problems associated with long-term use of the product. These problems include oral and lung cancers.  Cancer caused by smoking is the number one cause of preventable death in the US (American Lung Association, 2011).  Smoking is also responsible for about one in five deaths in the US from 2000-2004.  Serious doubts about the safety of cigarettes have been known since the 1940s (Burns et al., 1998).  In spite of mounting evidence to the contrary, the tobacco industry response has been to obfuscate the truth.  This has created a climate of distrust on the part of consumers and public health professional for the tobacco industry.  In order to maintain marketability, the tobacco industry must carefully navigate these issues in future product promotion plans.  

As it stands the tobacco industry's main target US market are young adults and possibly adolescents.  This is because both groups are very impressionable because of their young ages.  Members of older cohorts are increasingly less likely to smoke, and the incidence of the habit decreases substantially with age.  Smoking reaches a low of less than 10% among Americans 65 and older.  The national average for all groups is around 21% (American Lung Association, 2011; Burns et al., 1998).  Studies show (Burns et al., 1998)  that smokers who begin the habit at young ages become lifelong consumers.  However, because it is illegal to sell cigarettes to minors it would be unwise to market cigarettes to anyone under the age of 18.  Therefore, this cohort will be omitted from the study.  

This leaves the age group between ages 18-24 as the prime target market. According to the Census, in 2010 the percentage of Americans in this age group was about 10 percent and has grown 13 percent since 2000 ("Age and sex," 2011).  Research seems to suggest that males rather than females of this demographic group are more likely to smoke and more blacks than whites (American Lung Association, 2011; Burns et al., 1998).  Due to the declining US birth rate, it's unlikely that this age group will provide enough of a market for cigarettes going forward.  Also, anti-smoking messages, such as the Surgeon General's warning, are ubiquitous. So, marketers of cigarettes and similar products should consider the possibility that young smokers will not remain any more loyal customers than previous generations of the same cohort.

Determine why you believe the product or service is declining in popularity

As noted above there are serious health concerns associated with the long-term use of cigarettes.  The nicotine in cigarettes is notable for its addictive properties.  But the real health risk comes from the smoke.  Burning menthol and other chemicals causes a reaction which releases carcinogens and other toxins in the smoke.  The smoker then inhales these dangerous chemicals.  Cigarette smoke is the leading cause of lung cancer in the US and was responsible for over 400,000 deaths in the US between 2000 and 2004 (American Lung Association, 2011).  Secondhand smoke has been a commonly acknowledged health threat for years (American Lung Association, 2011; Burns et al., 1998).   The most serious health concerns for non-smokers is cohabiting with someone who smokes.  In many cases these non-smokers in the household are  children.  

Due to these serious health effects, cigarette advertising on television and radio has been banned in the US since 1970.  This creates a critical marketing handicap not found for other products.  Many states have passed excise taxes which greatly increase the expense of cigarettes in attempts to make it less affordable to target populations, such as the poor and disadvantaged.  Also, a number of states and municipal governments have banned cigarette smoking in public accommodations such as restaurants and bars.  The Bloomberg administration in NYC has also considered proscribing smoking in other public venues such as parks and beaches.  

The anti-smoking campaigns, higher taxation rates and further proscribing of legal use of the product have had an impact.  According to the American Lung Association (2011) the prevalence of smoking has declined from a high of 640 billion cigarettes sold in 1981 to a post-World War II low of 360 billion in 2007.  This is the lowest incidence of smoking in the US since 1936, when the country had a much smaller population.  It's notable that smoking prevalence has declined among nearly all major demographic, racial, ethnic, and age groups in the US.  It remains high among Native Americans however (American Lung Association, 2011).  This indicates a weak market for traditional cigarettes and related products in the US.  It should be noted these trends have also been observed in much of the developed world, including the European Union and Japan.

Make three (3) recommendations for possible action marketers of the product or service you selected could take to address the product’s declining appeal to consumers

It appears the future of the smoking industry lays with three factors: 1) good corporate governance practices, 2) alternative smoking or tobacco products, and 3) a marketing campaign that emphasizes moderate consumption.  In the case of good corporate governance, the tobacco industry should not attempt to counter anti-smoking campaigns with specious research. It should also prohibit any marketing messages from reaching minors.  There is already much evidence that the tobacco industry does observe these practices in the US and other developed countries.  These practices includes age verification, in-store access, and prohibiting product placement in popular entertainment media ("Marketing our Cigarettes"). 

However, the tobacco industry may not observe these practices as it moves into developing markets.  Grunner (1996) has noted that the tobacco industry has promoted many questionable business practices as it pursues new markets for its goods.  For instance, acting on the behalf of the tobacco industry, the US government has threatened trade sanctions against developing countries.   These bans would punish countries if markets for tobacco products are not opened and advertising bans are not lifted.  The industry has also lobbied to have tobacco added to the list of food products to be distributed to under-developed or famine-plagued regions as part of the Food for Peace program.  The tobacco industry must maintain principles of good corporate governance in its marketing as it pursues new markets.  If it doesn't it will risk a backlash both in the US and abroad.  

The second point concerns the use of alternative smoking products.  The tobacco industry has tried to adjust in recent years by bringing many newer tobacco products online.  These products include electronic cigarettes, smokeless tobacco and a new type of cigarette out of Sweden called Snus.  The US Surgeon General remains skittish about many of these products despite evidence they are often significantly safer to consume than traditional cigarettes (Woodruff,  2005).  In order to maintain and expand its existing market share, the tobacco industry will need to continue to invest in researching new products.  It appears the "sweet spot" still has not been found between a safe and healthy consumer food item and one that is also as enjoyable as traditional cigarettes. But this is the challenge for the industry going forward.

A third recommendation is to follow the lead of the alcoholic beverage industry and invest in a marketing campaign that stresses moderation in the consumption of its products.  Such a campaign can be an opportunity to emphasize the new alternative products the tobacco industry has brought on-line.  These products can be coupled with messages of moderation that may promote a somewhat healthier consumption of its products.  

Determine the best foreign country in which to market this product or service. Support your response with information from the CIA world factbook

China is the gold standard for foreign country marketing . China's enormous overall market size, rapid economic growth and industrialization, and unregulated consumer markets, provide an opportunity for purveyors of riskier goods and services.  According to the CIA's World Factbook, China has 1.35 billion people and a per capita income of $9300 ("East and Southeast Asia,"  2013).  Although its per capita income is small relative to the developed world, its middle-class alone is estimated at half a billion people. It already has over 300 million smokers.  This is a population equivalent to the entire US.  

Discuss your product segmentation and positioning ideas for this product or service in its debut in the new country. 

Product segmentation recognizes that a firm can sell variations on the same product to different categories of consumers.  This marketing strategy can help a firm increase its share of the market while reducing costs (Gillkin, 2013). Segmentation refers to this process of market differentiation.  When it is conducted well segmentation can lead to several different variations of a product.  These variations are then aimed at different targeted sub-groups of the population. 

The tobacco industry should use China as a laboratory to market its newer line of healthier cigarettes.  They can sell e-cigarettes, a type of Snus under one of their own brands, and smokeless tobacco.  They can also try other healthier alternatives, such as cigarettes with significantly reduced tar.  They should do so under a variety of brands that promote a health-focused smoking habit.  Also, note in the advertising campaigns that these products have lower exposure to carcinogens than traditional cigarettes.  It might market this line of goods to older, or potentially, female consumers who are uncomfortable with the health risks associated with smoking.  The industry can also consider providing traditional cigarettes, with appropriate warnings, to youthful, male consumers who don't care about risk.  They might even frame their marketing around people who enjoy a riskier lifestyle.  But firms can also promote a message of moderation as well.

References

Age and sex composition 2010. (2011, May). Census.gov. Retrieved from http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf. July 2013.

American Lung Association. (2011, July). Trends in tobacco use. Lung.org. Retrieved from http://www.lung.org/finding-cures/our-research/trend-reports/Tobacco-Trend-Report.pdf. July 2013. 

Burns, David M., Lee, Lora,  Shen, Larry Z., Gilpin, Elizabeth,  Tolley, H., Vaughn, Dennis Jerry & Shanks, Thomas G.  (1998). Cigarette smoking behavior in the US. In D.M. Burns, L. Garfinkel, & J. Samet (Eds.), Smoking and Tobacco Control Monograph No. 8, (pp. 13-112).  Bethesda, MD: Cancer Control and Population Sciences, National Cancer Institute, U.S. National Institutes of Health. Retrieved from http://cancercontrol.cancer.gov/brp/tcrb/monographs/8/m8_2.pdf. July 2013.

East and Southeast Asia: China. (2013). The World Factbook. US Central Intelligence Agency. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. July 2013. 

Gilkin, Jason. (2013). What is product segmentation? Chron.com. Retrieved from http://smallbusiness.chron.com/product-segmentation-22881.html. July 2013. 

Grunner, Heidi. (1996, Fall). The export of U.S. Tobacco products to developing countries and previously closed markets. Law and Policy in International Business, vol. 28, no. 1.  Retrieved from http://www.questia.com/library/1G1-19534207/the-export-of-u-s-tobacco-products-to-developing. July 2013.

Marketing our cigarettes. (2013). Philipmorrisusa.com. Retrieved from Retrieved from http://www.philipmorrisusa.com/en/cms/Products/Cigarettes/Marketing_Sales/default.aspx. July 2013.

Woodruff, Bob. (2005, Nov. 17). Smokeless tobacco a good alternative to smoking? Abcnews.com. Retrieved from http://abcnews.go.com/WNT/QuitToLive/story?id=1322995.